As the rupee continued to slide and stock markets persisted with heavy selling pressure, the finance ministry swung into action to assure foreign institutional investors of a slew of measures to increase their participation in currency derivatives and debt markets.

Finance Minister P Chidambaram on Tuesday interacted with FIIs.

They expressed concern on taxation issues, the high fiscal and current account deficits, and sought removal of capital gains tax.

“Everyone was here, everyone was bullish, there were no concerns (over exchange rate),” said Chidambaram, after the meeting the FIIs.

The minister told the investors the government would stick to its target of 4.8 per cent of the gross domestic product for the fiscal deficit and $60 billion for the current account deficit for 2013-14.

Even independent analysts expected the government to meet the new CAD target, against $70 billion pegged earlier.

However, only the government seemed to be confident of reining in the Centre’s fiscal deficit at 4.8 per cent of GDP, since it constituted 76 per cent of the entire year’s budget estimate in the first six months of the current financial year.

Officials said the measures, which could be announced in a month as they don’t need any changes in the law, would include greater participation for FIIs in currency derivatives market, deepening the bond markets, liberal conditions for use of collateral on a par with domestic investors, clarity on permanent establishment rules

and taxation issues.

In August, the Reserve Bank of India had put controls on institutional participation in the currency derivative market.

So, the finance ministry is going to consider some leeway on those.

Meanwhile, Economic Affairs Secretary Arvind Mayaram said the government would soon come out with clarifications on the definitions of FII and foreign direct investment in a couple of weeks.

As the rupee on Tuesday declined for a fifth day in row and closed at 63.71 against the dollar, down 47 paise over the previous day’s close, Mayaram said the currency would stabilise soon, amid inflows of up to $25-30 billion through the forex swap windows.

He exuded confidence that as the US Federal Reserve started tapering its monetary stimulus, it would not have an impact on Indian markets.

“I think a crazy, irrational kind of a sentiment is (prevailing in the forex market)... Whoever is punting on the rupee will lose very heavily. I feel very sorry for their families,” he told reporters.

The finance ministry will have a host of meetings with FIIs, as part of its efforts to engage with debt funds from the Nordic countries, West Asia and Australia and make them invest in India.

The ministry hopes the impact of QE tapering would be less under Janet Yellen, likely to take over as the US Fed chairman in January 2014.

India is planning to get its debt included in global indices including the ones run by JP Morgan and Barclays. RBI Governor Raghuram Rajan had also said the central bank would have conversations with international index agencies and some of the investment banks that create these indices.